Supreme Court to Curb Menace of Unlicensed, ‘Shylockian’ Money Lending Practices
The Supreme Court has decided to intervene and find ways to curb unlicensed money lending practices that exploit vulnerable borrowers. In a recent case [Raj Kumar Santoshi v. Prashant Malik], a Bench comprising Justices CT Ravikumar and Sanjay Karol expressed concern over the increasing menace of unregulated money lenders who often drive borrowers to extreme measures, including destitution and suicide.
“We are mainly peeved and pained by instances where ordinary laymen take such loans and are at last driven to streets or driven to commit suicide, on account of lenders entertaining Shylockian attitudes,” the Court said in its July 23 order.
The Court noted that these unlicensed money lenders avoid frequent transactions and offer large loans intermittently to escape the laws governing money lending businesses, such as the Punjab Registration of Money Lenders Act of 1938. These laws only apply if the lender engages in continuous transactions. Consequently, borrowers often end up repaying much more than the principal amount due to exorbitant interest rates.
The Supreme Court emphasized the need to regulate such practices to protect borrowers from falling into debt traps. The Court also highlighted that in cases involving large amounts, there could be significant tax evasion concerns.
“We will regulate such instances and rescue the hapless who happen to borrow loans and then are doomed in debts. In cases where huge amounts involve (amounts) such as ₹50 lakhs as also in crores, besides overreaching of the provisions under money lending laws huge evasion of tax may also (be) involved,” the Court said.
Given the seriousness of the issue, the Court suo motu impleaded the Union of India and the Delhi government as parties to the case to examine the larger problem of unregulated money lending.
The case at hand involved a borrower who received “friendly” loans totaling around ₹85 lakhs and was later sued in a cheque bouncing case. The borrower had approached the Supreme Court after the Delhi High Court refused to quash a summons issued by a trial court.
On July 23, the Supreme Court noted that this was not an isolated incident and criticized the practice of unregulated money lending, drawing a comparison to Shylock, the notorious money lender from Shakespeare’s “Merchant of Venice.”
The Court will next hear the case on August 23. In the meantime, the interim order preventing the trial court from passing any final order in the cheque bounce case will remain in effect.
Senior Advocate Manan Kumar Mishra, along with advocates Durga Dutt, Anjul Dwivedi, Rohit Priyadarshi, Ajay Kumar, Priyanshu Upadhyay, Sai Girdhar, Rashi Verma, and Pradeep Yadav, appeared for the appellant. Advocates Vijay Kumar, Jai Pal Singh, Dhiraj Kumar, and Avinash Kr Lakhanpal appeared for the respondent.
(With inputs from agency)
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